Correlation Between DMY Squared and RF Acquisition

Can any of the company-specific risk be diversified away by investing in both DMY Squared and RF Acquisition at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining DMY Squared and RF Acquisition into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between dMY Squared Technology and RF Acquisition Corp, you can compare the effects of market volatilities on DMY Squared and RF Acquisition and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in DMY Squared with a short position of RF Acquisition. Check out your portfolio center. Please also check ongoing floating volatility patterns of DMY Squared and RF Acquisition.

Diversification Opportunities for DMY Squared and RF Acquisition

-0.33

Correlation Coefficient

DMY Squared  RF Acquisition

Very good diversification

The 3 months correlation between DMY and RFAIR is -0.33. Overlapping area represents the amount of risk that can be diversified away by holding dMY Squared Technology and RF Acquisition Corp in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on RF Acquisition Corp and DMY Squared is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on dMY Squared Technology are associated (or correlated) with RF Acquisition. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of RF Acquisition Corp has no effect on the direction of DMY Squared i.e., DMY Squared and RF Acquisition go up and down completely randomly.

Pair Corralation between DMY Squared and RF Acquisition

Given the investment horizon of 90 days DMY Squared is expected to generate 10.04 times less return on investment than RF Acquisition. But when comparing it to its historical volatility, dMY Squared Technology is 30.61 times less risky than RF Acquisition. It trades about 0.04 of its potential returns per unit of risk. RF Acquisition Corp is currently generating about 0.01 of returns per unit of risk over similar time horizon. If you would invest  8.50  in RF Acquisition Corp on October 10, 2024 and sell it today you would lose (2.89) from holding RF Acquisition Corp or give up 34.0% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Against
Strength	Insignificant
Accuracy	20.16%
Values	Daily Returns

dMY Squared Technology  vs.  RF Acquisition Corp

dMY Squared Technology

Risk-Adjusted Performance

5 of 100

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in dMY Squared Technology are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of fairly strong basic indicators, DMY Squared is not utilizing all of its potentials. The latest stock price disturbance, may contribute to short-term losses for the investors.

RF Acquisition Corp

Risk-Adjusted Performance

1 of 100

Weak

Compared to the overall equity markets, risk-adjusted returns on investments in RF Acquisition Corp are ranked lower than 1 (%) of all global equities and portfolios over the last 90 days. Even with relatively invariable forward indicators, RF Acquisition is not utilizing all of its potentials. The newest stock price agitation, may contribute to short-term losses for the retail investors.

Pair Trading with DMY Squared and RF Acquisition

The main advantage of trading using opposite DMY Squared and RF Acquisition positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if DMY Squared position performs unexpectedly, RF Acquisition can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in RF Acquisition will offset losses from the drop in RF Acquisition's long position.

The idea behind dMY Squared Technology and RF Acquisition Corp pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

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Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Idea Breakdown module to analyze constituents of all Macroaxis ideas. Macroaxis investment ideas are predefined, sector-focused investing themes.